Position changes.

Today, our XLB position ended the day up $388. Most of our short puts expire tomorrow and they are out of the money tonight. It will be interesting to see what happens tomorrow. We probably should have closed 7 contracts today, all profitable. Their value has dropped down to a few cents. Sometimes, you get busy and miss opportunities. Focus on the task at hand in order to maximize the profitability of every position.

Tomorrow, we will definitely close any OTM position and roll any ITM. The out of the money positions tonight can easily be in the money tomorrow. You can’t predict the future and it seems that nearly always it is a mistake to wait for that last few cents to come in. Profitable positions can reverse overnight. But, with options, you are never out of creative ways to keep the cash flow positive. Be sure to check back tomorrow morning for a status on these positions. Right now, we are long 77 DIA-Weighted Deltas and have a daily time decay of about $30. XLB is working well.

Our WalMart trade has had it’s ups and downs. We are quickly nearing profitability, finally! The position is now down $163 since we started, so it is having a really good week and is improving as we continue to collect around $30 a day in time decay. Trading options for profit is never an easy money game – and positions must be structured properly. You should concentrate on keeping the market risk as low as possible (Delta near zero) and Theta as high as possible (time decay). We like to sell a few puts or calls on Friday as they are expiring in order to squeeze out a few more dollars on existing positions. If we do this tomorrow, we’ll discuss it here.

We frequently let some positions expire on Fridays so they will be called away and converted back to cash. Most of the time, this is when a position has become so far ITM that the credit from a roll is nowhere hear our 1.5%/month target. When you can only get a few dollars for rolling forward, it’s often better to just let the position be called away and start fresh. Watch your transaction costs as you close positions. More on this later…..